Trent Ernst, Editor
After dropping to a perilous $130US/tonne, metallurgical coal is now selling at $145US/tonne on the spot market.
That’s still down from $225/tonne last year, but is the highest it’s been in three months. While producers may be breathing easier, companies are still working hard to reduce costs.
For Walter Energy, that means not re-opening Willow Creek mine. Willow Creek shut down last year when prices dipped below $145, putting 250 people out of work.
The cost per tonne at Willow Creek is estimated to cost about $150/tonne to produce. That’s about $20-$30/tonne more expensive than other mines in the area.
At the Coal Association of Canada’s conference last week, Tony Meyers, Vice-President of Canadian operations for U.S. coal miner Walter Energy Ltd., said he’s heard comments that the price has hit the bottom, but “I’m not going to say that out loud.”
The Scotiabank Commodity Price Index recently reported that steelmakers were starting to run out of stockpiles of coal, and have begun to restock, which is pushing prices slightly higher, though Meyers says that mines that are surviving this current downturn in the market are focusing on reducing mining costs, and not hoping for increased prices.
This is the message coming out of Teck as well. Teck has slowed down their plans to re-open the Quintette mine, and has worked hard to reduce production costs at their other operations.
While they are slowing down at Quintette, they have not stopped, with bulk samples expected to start in the next month or two.
The company has managed to trim about $82-million from its budget annually, but is hoping to get that number up to $200-million in the next year.
The Scotiabank Commodity Price Index predicts that “Current contract prices are near cyclical bottom,” and should start to pick up again. Steel makers in China are starting to re-stock, which is starting to drive prices up.